Insurance Fraud Taskforce report. A work of fiction or an objective overview?

20 January 2016

Having waded through the 92 pages of the Insurance Fraud Taskforce’s final report, published by the Treasury on Monday at an insurance industry event (would you believe? Yes, probably), the cynic would be forgiven for thinking it was a well-orchestrated bid by the insurance sector to ride roughshod over the claimant sector and drive through their agenda for the changes they want implemented by government.

It’s disappointing to see a document that is supposed to talk about the supposed epidemic of widespread insurance fraud primarily focus on the personal injury sector, with the odd smattering of acknowledgement that fraud may occur in other areas of insurance.

Equally the tone and language is often inflammatory and subjective, reflecting the needs of the insurance sector and not of their policyholders. Indeed the report regularly references the fact that consumers don’t understand the complexities of insurance and therefore make ‘mistakes’ that can be misconstrued as fraud.

Are they saying that consumers are a bit thick and are easily manipulated by rogue traders into making false claims?

Rather, most consumers who read this report will feel patronised and insulted by many of the comments that imply they are gullible. Hypocrisy is not in shortage in this report.

At the same time the report claims that some claims management companies (CMCs) and solicitors’ firms are merely fronts for organised crime, an outlandish statement that can only have a divisive impact.

I question where the authors have drawn the evidence for many of these observations – which they report as fact – and why are we not seeing the regulators take more action to imprison these unscrupulous players. There are so many unfounded claims and statements that it is difficult at times to take the report seriously.

We must applaud the insurance sector for identifying £1 billion of detected fraud and congratulate them for passing these savings on to the consumer and sending the perpetrators to prison. Oh, but wait. We have only seen a handful of convictions and insurance costs are rising at the highest rate in years.

There are regular references to the fact that the number of personal injury (PI) cases, particularly for whiplash are on the rise and that there has been significant growth in the number of PI-focused CMCs.

The real facts are that the number of motor-related PI claims peaked in 2011/12 and have fallen year on year since then and are now at their lowest level since 2009/10.

What’s more, the reports from the Claims Management Regulator show that the number of PI CMCs continues to fall – the regulator’s eye-watering increases in the fees we pay to operate are responsible for this in part.

The report continues to use assumption in the absence of facts, merely suggesting that many cases of whiplash are brought close to the time limit for doing so, making it more difficult to gather medical evidence.

Our data, and that of National Accident Helpline, actually shows that the vast majority of whiplash claims we deal with are made within a few months of an accident happening.

By insurers’ own admission, dealing with them and making a claim can be difficult. Natural market forces dictate that if solicitors and CMCs didn’t add value, then they wouldn’t exist.

How can we trust the insurance sector to be fair when giving consumers the right settlement and access to justice when they are not fair and transparent in the way they operate?

One of the recommendations from the taskforce is that there should be guidance on what communications with claimants is acceptable where they want to check that they have actually instructed the solicitor who has submitted a claim in their name. Will this also include restricting insurers from their current unrestricted first bite at the claimant cherry?

Recently I suffered a non-fault motor accident and despite telling my insurer that I had suffered no injury, they offered me access to their own legal services to make an injury claim on more than one occasion, including unsolicited calls from a third party.

I am aghast at how much rhetoric and scaremongering the report contains, from allegations that the claimant is rotten to the core, as a front for criminal gangs, drug dealing, burglary and even terrorism through to the fact that insurance fraud contributes to the destruction of social cohesion.

Many of the citations to these claims are to stories driven by the insurance sector and in some cases not even relevant to the claims they are making.

The language used is clearly designed to whip up sensational headlines and does nothing to show what solicitors and CMCs do to help genuine victims of accidents – the odd passing reference to how the majority are honest and decent operators does not balance the drumbeat of negativity.

“An accident has gone from a misfortune to a business opportunity”, according to the taskforce. It begs the question of what is insurance if not a business opportunity to protect people from the potential of misfortune.

I am not so naïve as to say that there is no bad practice on the claimant side – as there is among defendant insurers as well – and I agree more needs to be done to stamp out the rogue practices of that small minority that give us all an unjustifiably bad name. But again the report is exceptionally critical of the claimant sector, particularly CMCs and their accountability for direct marketing activities and knowledge of claim sources.

Many of us invest heavily in our practices and procedures to ensure we deliver the most ethical activity possible. We are proud of this and if people are found to be bending or even breaking the rules, then more needs to be done to stamp them out of the industry.

This responsibility falls to everyone in the industry, including solicitors, to have accountable and well-audited processes to show the governance of all their marketing activity and lead-generation sources. It isn’t difficult to tighten the net and stamp out the rogue traders, and we agree more needs to be done to.

The report highlights just what has been done recently to make changes in the industry but most of the burden of these changes have been aimed at the claimant sector. The insurance sector needs to play its part more actively than just shouting at those on the other side.

The report should have been stronger, for example, in urging insurers to reduce the number of pre-medical offers they make, rather than saying they should think about it.

When you take out the rhetoric, many of the less contentious recommendations by the taskforce are actually sensible and should be encouraged. However, the government needs to think long and hard before any changes are implemented and avoid throwing the baby out with the bathwater.

Raising the small claims limit to £5,000 and eliminating damages for whiplash are going to be counter-productive and allow the insurance sector to renege on their obligations to be fair to the consumer.

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